What Is a Bond Fund?

The bond fund is a fund that invests in bonds as the underlying asset.

A bond is a debt instrument issued by a corporation or government entity. Investors can purchase these bonds when they are issued or on the secondary market. The company or government entity agrees to pay the investor a specified rate of interest over the life of the bond. 

A bond fund is a pool of funds built up by many investors. A fund manager takes the funds and uses them to invest in bonds. The manager decides which bonds to buy and which ones to sell. A bond fund is a very passive form of investment, as all of the investment decisions are handled by the manager. 

Benefits of Bond Funds

• Ease of investment—Bonds are a somewhat complicated method of investment for some. Bond funds make it easy to buy and sell your shares when you want. 
• Steady return—Bond funds can provide you with a very steady return on your investment over the years.